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ABOUT THE DMO • DMO Purpose: Equip and sustain the Australian Defence Force (ADF) and provide advice to Government • DMO’s two goals: (i) To deliver projects on time, on budget and to the required levels of capability, quality and safety (effectiveness); and (ii) Make DMO more business-like, accountable and outcome-driven (efficiency) DMO: SOME HIGHLIGHTS Conduct nearly $45 million of business each working day Sign more than 2,500 contracts worth more than $100,000 every year Significant improvements in schedule performance since Kinnaird In 2011, nearly 50 projects or phases approved worth more than $6B Navy: In 2011, HMAS Choules purchased and successful ANZAC ASMD trials Army: In 2011, new lighter body armour and enhancements to combat uniform, upgrade to Bushmaster vehicles and Counter IED systems deployed Air Force: In 2011, 24 Super Hornets, 3 Multi Role Tanker Transport aircraft and a fifth C-17 heavy lift aircraft CEO DMO KEY PRIORITIES • Support and equip ADF by delivering quality capability with a high focus on safety • Exercise ‘measured urgency’ in the workplace – simplifying processes and speeding up outputs • Improving business acumen of DMO workforce • Engaging with Industry in a strongly commercial but not combative way • Establishing a major projects negotiation cell • Piloting 'managed contractor' arrangements for selected projects • Rebalancing the organisation SUPPORT TO OPERATIONS • Continues to be our first priority • Has involved an enormous amount of effort by many people right across the DMO (not just in the coordinating ops cells) including sustainment staff • Has provided a model for success in terms of level of responsiveness to our customers, taking user feedback seriously and focused engagement with Industry • Our long-term focus must now begin to shift to planning for DMO’s contribution to the staged withdrawal and refresh of equipment from the MEAO as directed by Government 1999 $3,600 2011 $27,500 BETTER PROJECT MANAGEMENT GATE REVIEWS • An effective tool for exposing issues, directing projects, improving outcomes and soliciting stakeholder support. • ‘The forest and the trees’ - external reviewers provide critical input with fresh eyes • Applying “Lessons Learned” • DMO is continuing to develop and expand our Gate Review capacity. PROJECTS OF CONCERN • Highly effective way of focusing attention on real issues • Once a project is listed it only comes off by remediation or cancellation EARLY INDICATORS & WARNINGS • A set of internal mandatory triggers that would require projects to be reported to Ministers if schedule, cost, capability, industry performance or risk thresholds are breached. MAJOR PROJECTS REPORT 2010-11 • ANAO assurance of DMO’s performance on 28 major equipment projects • Project cost performance is good • Project Schedule – remains a concern. Driven by underestimation by industry and/or Defence of technical maturity or complexity Aggregate Cost Performance Aggregate Schedule Performance (over project life) -0.9% 1.28 (or 28%) SCHEDULE VARIANCE (PROJECT TYPE) 2010-11 MAJOR PROJECTS REPORT Average Schedule Variance as at 30 Project Type June 11 (from FOC) % Project Type Average Schedule Variance as at 30 Jun 10 (against Developmental 74% FOC) % Australianised Military-Off-The Shelf (AMOTS) Military-OffThe-Shelf (MOTS) Range % Range % 0%-128% 24% 0% - 74% 0% 0% - 0% Integration risk is insufficiently understood (MOTS + MOTS ≠ MOTS) DEFENCE ACQUISITION COMPLEXITY (2) DEFENCE SUSTAINMENT COMPLEXITY (2) Complexity Frontier for Maintenance Activity for Most Large Australian Organisations BACKUP THE 2011-12 DEFENCE BUDGET (Figures taken from PAES 2011-12) Defence: • $26.4 billion in 2011-12 • Plus DMO’s direct appropriation relating to workforce & operating expenses (Approx $0.9 billion) TOTAL = $27.3 billion • Approximately 1.8% of Australia’s GDP DMO: • DMO’s 2011-12 budget represents 37% of Defence portfolio budget • Approximately 0.7% of Australia’s GDP THE 2011-12 DMO BUDGET (as at PAES 2011-12) • $10.1 billion of funding to support the ADF – $4.6 billion on Acquisition ($5.8 billion 2010-11 actual) – $5.4 billion on Sustainment ($4.8 billion 2010-11 actual) – $0.1 billion on Policy Advice, Management Services & Industry Programs BUT: the “sting” is next year – 2012/13 DMO ACQUISITION AND SUSTAINMENT SPEND 16 Most of 2012/13 reduction taken by imports AUD Billions - constant 14 12 10 Forecast Activity Offshore = 47% 8 6 4 2 Forecast Activity in Australia = 53% 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21